Ethical sourcing is too focused on tick-box standards and abstract audits. Instead they should be about creating secure jobs and ensuring dignity at work, writes Richard Hardyment

What is the point of ethical sourcing? Some companies say it’s about doing less bad: reducing harm to people and planet. A few aspire to bolder ambitions and talk about impact. But what is the change we aspire to achieve? Surely the social purpose of procurement should be to improve how people feel about life. Responsible supply chain management must ultimately be about enhancing wellbeing.

Aristotle described wellbeing as his summum bonum – the “chief good”. As he put it: “Happiness, more than anything, is absolutely final. For we always choose it for the sake of itself and never for the sake of something else.” By this, he meant that we want to be happy for its own sake. Feeling good is the ultimate aspiration that we all share in life. All other things – safety, freedom, status, money – are a means to that end.

This isn’t just hippy stuff. It’s a rigorous science with some huge, practical implications for supply chains. The science of wellbeing has advanced at a rapid pace in recent years. We now know more about what makes people happy than ever before. These studies typically don’t just measure short-term moods. They empirically assess how people feel about their life in the round.

Ever since the 1970s, academics have known that there is a low correlation between income and happiness

Self-reported surveys are used to measure life satisfaction. For example, a miner might be asked: “Taking all things together, how satisfied would you say you are with your life as a whole these days, where 10 represents the best possible life and 0 the worst?” Pictures are shown in illiterate communities to explain the ideas. Data is gathered on working practices, incomes, health, safety, relationships and so forth. After some statistical regression, out pop the key variables. These reveal what does most to affect happiness for the average individual in any given community.

The first major finding is a weak link between wages and wellbeing. Ever since the 1970s, academics have known that there is a low correlation between income and happiness. Professor Richard Easterlin famously proposed a paradox. Take any two individuals at random, and the richer is likely to be happier than the poorer. But above a certain pay level, additional income doesn’t make the poorer or richer any more satisfied in the long run.

The explanation for this is that money is just one part of how we feel about life. Our relationships, leisure time and health don’t always correspond to salaries. Secondly, as wages rise, we adapt. Comparison with peers is typically more important than absolute levels of wealth. But does the same thinking apply to a poor plantation worker at the top of a multinational supply chain?

For those above the povertly line, money rarely improves wellbeing. (Credit: Singkham/Shutterstock)

This is where things get a bit controversial. Several studies have found little relationship between wealth and wellbeing amongst the poorest. In my new book, The Wellbeing Purpose, I examine case studies of fruit farmers in Senegal, paddy farmers in Malaysia, palm oil growers in Ghana, trash pickers in Nicaragua and agricultural labourers in Vietnam that each suggest levels of happiness correspond weakly with incomes.

These findings have some profound implications for supply chains. After all, we keep hearing that big business is paying the bosses too much, and the poorest in their operations and supply networks too little. NGOs are campaigning noisily for fair wages.

Yet a note of caution is needed. For those who cannot afford the basic necessities in life (food, water, a safe place to sleep), money is vital for happiness. Some of the greatest gains in wellbeing can come from increasing the incomes of the very lowest paid. But although money matters in some situations, it is rarely the solution to improving wellbeing for those above the poverty line. So what practical steps can businesses take to boost life satisfaction the most?

Disadvantaged groups such as women and minorities receive the greatest boost to wellbeing from securing employment

Creating employment is the single most powerful means to make more people feel better about life. Jobs enhance self-esteem, strengthen personal networks and promote a feeling of control. This is particularly true in the world’s poorest countries. In most cases, having a job – no matter what job – boosts wellbeing. But the impact of creating a job is bigger for some people than others.

Disadvantaged groups – such as women and minorities – receive the greatest boost to wellbeing from securing employment. For example, global food business Mars has established agricultural programmes that specifically source commodities from female smallholder farmers. Walmart, the world’s largest retailer, has introduced a pioneering “women-owned” label for products bought from female-run suppliers. To make life better, we need more companies to create jobs across the supply network that are targeted at those who will benefit the most from them.

Secondly, businesses can ensure that long-term contracts are in place. Whilst we’ve seen that levels of income typically don’t correlate with life satisfaction, job security does. Palm growers in Ghana, for example, with written deals to supply their crop turn out to be much happier with life than those in more precarious self-employment. Establishing formal contracts, particularly long-term ones, takes the pressure off suppliers. Reliability is the crucial complement to providing a job that can boost wellbeing.

Mondelēz links consumer happiness with coffee bean suppliers' wellbeing. (Credit: Mondelēz)

Finally, the science shows a host of other variables that relate to happiness. Having great personal relationships (with co-workers, as well as at home), good physical and mental health, dignity at work, safe conditions and low levels of corruption all support higher levels of life satisfaction.

There is a business case for focusing on wellbeing in supply chains. Happiness relates strongly to productivity. A link with brands can also be made. Mondelēz International, the global foods company that makes Kenco coffee, has a sourcing programme called Coffee Made Happy. Targets include to help one million coffee farmers become successful entrepreneurs by 2020. The company makes an explicit link between the consumers’ happiness and the suppliers’ wellbeing. Mondelēz says that “our coffee makes people happy” when they drink it, and they’ve extended that mission to the farmers who make the beans as well. That’s a neat way to use wellbeing – the aspiration we all share – to drive affinity with a brand as well as making life better for suppliers.

For multinationals with extensive supply networks, the opportunities to make millions feel better about life are immense. Too much ethical sourcing today focuses on tick-box standards and abstract audits. We need to examine the real evidence on what does, and does not, affect life satisfaction. The conventional criteria used to judge success often obscures wellbeing. We need to shift from predetermined guesswork to proven levers that change feelings. What we surely desire is for those working in supply chains to have basic rights, safe conditions and environmentally responsible practices because these things make life better today and for future generations. An ethical supply chain should be about boosting life satisfaction. That’s not easy to measure. But, as Aristotle put it, it’s the ultimate end we can all agree on.

Richard Hardyment is the author of The Wellbeing Purpose, published by Greenleaf. He has spent over a decade advising companies on responsible business practices and sustainability. He is a director at Corporate Citizenship, a global management consultancy.

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sustainable supply chains  science of wellbeing  wages  unemployment  Mondelez  Easterlin paradox 

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